US stocks trade mixed as market awaits possibly the biggest Fed rate hike since 2000

US stock indexes traded little changed Wednesday midday, ahead of the outcome of a two-day Federal Open Market Committee meeting that is expected to deliver the first 50 basis-point interest rate hike since 2000.

Oil prices were up on news that the EU has proposed a ban on Russian oil.

How are stocks trading?
  • The Dow Jones Industrial Average DJIA,
    + 0.31%
    rose 94 points, or 0.3%, to 33,226

  • The S&P 500 SPX,
    + 0.20%
    rose 6 points, or 0.1%, to 4,181

  • The Nasdaq Composite lost 40 points, or 0.3%, to 12,524

On Tuesday, the Dow industrials DJIA,
+ 0.31%
rose 67.29 points, or 0.2%, to close at 33,128.79, the S&P 500 SPX,
+ 0.20%
gained 0.5% to finish at 4,175.48. The Nasdaq Composite COMP,
-0.24%
added 0.2% to end at 12,563.76.

Read: ‘Bubble stocks popped’ but it’s still not safe to buy them, says Ray Dalio, founder of the world’s biggest hedge fund

What’s driving markets?

Alongside a half percentage point interest rate hike, the Federal Reserve is expected to announce the start of “quantitative tightening” when the central bank’s decision is announced at 2 pm Eastern Time. Investors will also focus on a news conference with Fed Chairman Jerome Powell at 2:30 pm Eastern Time. Clarity from the Fed on size and scope of future rate increases could give beleaguered stocks a lift, say some analysts.

Read: Fed on track for biggest rate hike since 2000

“We’re tilting our positioning toward areas of the market that can perform well in an environment of rising rates, high inflation, and elevated volatility,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a Wednesday client note.

“We prefer commodities, value stocks, and the energy and healthcare sectors,” he wrote, adding that it is better to position for inflation, rather than recession, which “is still only a possibility.”

Rob Haworth, senior investment strategist at US Bank Wealth Management, is waiting for more direction from the Fed. “I think the market is priced for the Fed to be fairly aggressive. What that leaves us, is thinking that there’s some upside risk here, ”Haworth said in an interview.

“But a lot of that depends on what the Fed says and what Jerome Powell says about the forward view. Do they affirm what the market is saying and projecting, which is somewhat beyond the current dot plots, or do they talk about more data dependence and reacting more to the data as it comes forward? ”

Bryce Doty, senior portfolio manager at Sit Fixed Income, said that as Powell kicks off his aggressive path to tighter financial conditions, “there is more pain to come as yields continue to move higher,” even with the carnage incurred by bond investors so far this year. ”

“While the worst may be over in terms of bond market losses with the Bloomberg Aggregate Bond Index down 9.5% in the first four months of the year, inflation is still a problem,” Doty said in emailed comments Wednesday.

The yield on the 10-year Treasury note TMUBMUSD10Y,
2,982%
was down 1 basis point at 2.989%, while that of the 2-year TMUBMUSD02Y,
2,780%
was up 7.4 basis points to 2.805%.

In US economic data, private payrolls rose by 247,000 in April, according to the ADP National Employment Report released Wednesday. Economists polled by The Wall Street Journal had forecast a gain of 390,000 private sector jobs.

“In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said Nela Richardson, chief economist at ADP.

Meanwhile, US trade deficit jumped 22.3% to record $ 109.8 billion in March, the US Census Bureau and the US Bureau of Economic Analysis said Wednesday. US imports climbed 10.3% to $ 351.5 billion, while US exports increased 5.6% to $ 241.7 billion in March.

In addition, the Institute for Supply Management purchasing managers index for services sector showed weaker new-orders growth and employment, with the number dropping to 57.1% in April from 58.3%, below forecast.

Oil was also in focus, with prices for both Brent BRN00,
+ 3.83%

BRNN22,
+ 3.83%
and West Texas Intermediate crude CL00,
+ 4.03%

CL.1,
+ 4.03%

CLM22,
+ 4.03%
up almost 4% each after the European Union proposed banning Russian oil imports under a phased six-month plan, and refined products within a year.

The move would be part of a sixth batch of EU sanctions against Russia over its invasion of Ukraine that began in late February.

Investors are also digesting a fresh batch of corporate earnings on Wednesday also, with results expected from eBay Inc. EBAY,
-0.49%
and Etsy Inc. ETSY,
-1.22%,
among others, after the close.

Which companies are in focus?
  • Shares of Moderna Inc.
    MRNA,
    + 0.18%
    dropped 0.9%, despite the fact that the company smashed Wall Street’s earnings and revenue expectations for the quarter.

  • Lyft Inc.
    LIFT,
    -31.44%
    stock tumbled 31% after the ride-hailing group reported a better-than-expected first quarter, but profit and sales guidance disappointed. Shares of rival Uber Technologies Inc.
    UBER,
    -7.38%
    fell around 7.8%, after the company reported a $ 5.93 billion net loss in the first quarter derived from its investments in other three companies.

  • Chinese ride-hailing company Didi Global Inc.
    DIDI,
    -2.49%‘s
    American depository receipts fell 3%, after the company said it was under investigation by the Securities and Exchange Commission regarding its 2021 IPO.

  • Herbalife Nutrition Ltd.
    HLF,
    -9.10%
    slid 9% towards a two-year low after the multilevel marketing company announced forecast reductions due to newer “distributors.”

  • Airbnb Inc.
    ABNB,
    + 3.05%
    shares climbed 2.1% after the lodging-booking company reported forecast-beating results and said it surpassed 100 million nights booked in a quarter for the first time.

  • Match Group Inc.
    MTCH,
    -1.30%
    stock fell 0.8% after the online-dating company’s revenue outlook fell short of expectations.

  • Starbucks Inc.
    SBUX,
    + 6.87%
    stock rose 6.2% after the coffee giant reported in-line earnings, amid rising costs and inflation and thinner margins. Chief Executive Howard Schultz said “record” demand was helping accelerate store-growth plans.

  • Advanced Micro Devices Inc.
    AMD,
    + 2.97%
    shares rose 2.5% after the semiconductor company reported more than $ 5 billion in quarterly revenue for the first time Tuesday.

How did other assets fare?
  • The ICE US Dollar Index DXY,
    -0.10%,
    a measure of the currency against a basket of six major rivals, was down 0.1%.

  • Gold futures GC00,
    -0.16%
    slipped, with gold for June delivery GCM22,
    -0.16%
    eased 0.2% to $ 1,867 an ounce.

  • Bitcoin BTCUSD,
    + 4.06%
    was up 4.5% at $ 39,330.

  • In European equities, the Stoxx Europe 600 SXXP,
    -1.08%
    fell 1.1%. London’s FTSE 100 UKX,
    -0.90%
    dropped 0.9%.

  • In Asia, the Hang Seng Index HSI,
    -1.10%
    fell 1.1% in Hong Kong, while many other Asian markets remained closed for a holiday.

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